India Services PMI Rises to One-Year High in January

Activity in India's service sector expanded at the fastest pace in a year last month, driven by rising foreign orders, but businesses were a little less optimistic about the future, a survey showed on Tuesday.

The HSBC Markit services Purchasing Managers' Index, which gauges business activity from a survey of over 400 companies ranging from banks to hospitals, jumped to 57.5 in January from 55.6.

The services PMI has held above 50, the level that divides growth and contraction, for over a year, even though India appears set to finish the 2012/13 fiscal year with its slowest economic growth rate in a decade.

Services make up over 60 percent of Asia's third-largest economy. Some of India's top services exports are software, back-office support and banking services.

"Inflation readings held broadly steady, with fuel, raw material and labour cost pressures still simmering. These numbers underscore the need for the RBI to approach policy easing with caution," said HSBC's Eskesen.

The central bank is expected to cut the repo rate by another 75 basis points to 7 percent by September.

Manufacturing activity grew in January at its slowest pace in three months, a similar survey showed last week.